> Adding a market participant with the motive and means to buy when the price is low and sell when the price is high reduces the price volatility.

Anecdotally, I've heard from people who work in business related to the australian energy market that it is sometimes profitable to push the electricity system in a direction that increases imbalances of supply & demand (i.e. increase the volatility of the actual system -- not merely the price) in order to maximise profit of an individual market participant.